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Sunday, July 05, 2020
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Poultry sector during pandemic

Smriti Singh

The fast- moving coronavirus pandemic is adding a significant uncertainty to global poultry markets. Since 2011, the global poultry industry has witnessed slower growth and higher market volatility. Global trades have continuously been challenged by diseases like avian influenza and other government policies like changing standards in import markets as well as local supply issues in exporting countries.

Global trade snapshot “Year 2019”

Year 2019 witnessed Thailand, Russia and Ukraine emerging as top exporters as their exports grow by more than 7%. EU trade grew by 4% in second half of 2019. Over the same period, the global poultry traders, Brazil and US, saw exports drop by 8% and 2% respectively.  Russia reached an impressive export total of over 300,000 metric tons in 2019, with average prices rising from USD 1/kg in 2018 to USD 1.50/kg in 2019, showing the increased value creation by Russian traders. China has become the number one export market for Russia.

Global trade snapshot “Year 2020” & impact of pandemic

The studies and reports show China as the biggest driver of volatility. In February 2020 China has been hit by supply shocks due to Coronavirus-related transport restrictions. The local farmers’ access to inputs (feed, medicines, DOC) and sales of finished birds were restricted.
Coronavirus has shaken up local markets, with local production down by about 40% in February and prices for white broilers dropping sharply and yellow broilers even further.

Table 1: Global whole-chicken and chicken-cut markets (USD/100kg), Q1 2018- Q1 2020

Adopted from Rabobank Report on Poultry Sector for Q1,2020

India’s poultry market & impact of pandemicThe global trade is hampered as many ports are subjected to delays and lockdowns being practiced by different countries have forced traders to move to other ports, to reship or to delay shipments. Furthermore, potential exporters, like the US, EU, and Brazil, are increasingly being challenged by local spread of the virus in their domestic market and by more difficult trade conditions.

India is ranked as third largest producer in the world after China and the USA and the fourth- largest chicken producer in the world. The poultry sector has been growing in India since decade with increasing numbers of players establishing small but organized business.

Indian Poultry at a Glance
Annual Turnover INR 1,20,000 Crore
Growth Rate 6 to 8 per cent per annum
Production of Broilers 400 crores per annum
Production of Eggs 9300 crores per annum

A large group of poultry companies   are based in the South India. Andhra Pradesh and Telangana accounting for majority of the birds and eggs produced in India. Hyderabad in Telangana is the epicenter for the poultry industry in India

poultry data

Source: Livestock Census 2019; Data for top 10 states

Impact of Pandemic
The poultry industry has been hit less by the pandemic, more by misinformation. The industry has been largely hit by fake messages and fear being spread through social media.

This misinformation passed through social media and the fear have lowered the wholesale price of the eggs by 15 to 30 per cent since the outbreak of the coronavirus disease.

poultry chart

Source: National Egg Corporation Committee (NECC) & Papaak.com

NECC has stated that the average farmgate prices has fell to INR 2.50 a piece against a production cost of INR 4 and this caused approx. loss of INR 600 crore for egg producers since January 2020. Apart from egg producers, the broiler farmers are unable to pass on the input cost to the wholesalers and are incurring the loss on birds and eggs.

poultry graph

The coronavirus pandemic will bring change in economic and market conditions in poultry industry in 2020.

  • After the settlement of the pandemic and its fear, poultry would be the least impacted protein in global economic slowdown due to its price competitiveness.
  • The pandemic will affect the consumer behavior which will shift towards more at- more at-home consumption, impacting poultry demand in some markets. This means that companies with good access to hygienic and branded food retail will benefit, while local and domestic foodservice suppliers may get impacted.
  • The complex situation in China in January and February, which resulted in a sharp decline in poultry production, is expected to affect global markets until May or June or may be more. The local producers need to rebuild supply, and markets need to rebuild demand and prices, which will also push up imports.
  • The drop in poultry demand and hence, the production market will be bearish for the commodities like maize and oilseeds which contributes mainly as poultry feed.

Apart from the pandemic which the global market hopes to settle sooner or later and hence, it impacts. The poultry market in 2020 will also be impacted by trade policies and disruptions.

Several bilateral trade negotiations and national policies will open new trade flows:

  • The re-opening of US poultry for export to China: Shipments from China’s fast-growing USD 1.9bn import market started earlier this year but have since slowed due to Coronavirus. Later this year, recovering Chinese demand will compete with Brazil for market leadership, which might push prices down.
  • Current negotiation between the US and India: If the US improves the access to India as per current negotiation between US and India, with chicken and dairy could impact local industries, especially companies active in the small-but-growing Indian processed market.
  • The new EU-Vietnam free trade agreement: This agreement being recently implemented could pave a two-way trade with EU companies selling dark meat to Vietnam and Vietnamese processors selling processed breast meat to Europe.
  • Russia becoming competitive exporter: Since 2019, China has become the number one export market for Russia. In later year, the pending new openings for trade to UAE and Japan have added Russia in top exporter in global poultry. Hence, increase in competitiveness will also affect the pricing.
  • South Africa implementing a new poultry master plan. As per Plan drafted in November 2019 with an ambition of developing a strong local poultry industry that supports the South African economy (with an unemployment rate of more than 30%). The master plan includes a combination of local expansion and import restrictions. Tariffs on major exporters to South Africa can be expected soon, which could impact global trade flows.

 

(The author is the Senior Manager, Global AgriSystem Pvt. Ltd, New Delhi. Views expressed are personal.)

 

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